Exclusive: YouTube pays video creator more than $1M for loyalty

YouTube’s most popular video creators are so vital to the service’s success that it is paying them for their loyalty.

Facing growing competition from Facebook and other rivals, YouTube has paid more than $1 million to one group that creates widely viewed videos and has promised to remain active on its platform, The Chronicle has learned. Similar payments to other high-profile contributors have been discussed, according to sources who weren’t authorized to speak publicly about the deals.

“When you have this creative community, everybody’s going to need to work extra hard to retain the talent,” said Paul Verna, a senior analyst at research firm eMarketer. “YouTube is no exception.”

YouTube declined to comment on the seven-figure pay-out, but said it has supported video creators for years through efforts like marketing, funding and training. “We will continue to recognize and value the creativity of our top talent,” the company said.

The deals aren’t going to ordinary YouTube users, or even those who have posted one or two widely viewed videos. Instead, YouTube is trying to negotiate deals with producers who create TV-quality content and have large fan bases, consistently drawing more than 50,000 views per video.

Ad revenue

With big audiences comes substantial ad revenue.

YouTube controls a 20 percent share of revenues this year in the $7.8 billion U.S. digital video ad market, according to research firm eMarketer. But as its rivals gain more momentum, YouTube, which was acquired by Google in 2006 in a $1.65 billion stock deal, could be in danger of losing its dominance.

“There is a lot more pressure now to continue to validate its place in the video ecosystem, which is getting more and more crowded,” Verna said.

The biggest potential competitor could be Facebook, which sees its future in video.

Once a hub for text status updates, the world’s biggest social network racks up an average of more than 3 billion video views per day, with more than half of U.S. users watching at least one video when they log onto the social network.

Much like YouTube, which is trying to attract new viewers by showcasing movies alongside its mountains of user-generated content, Facebook has also worked to land professionally produced videos, including Twilight-related films. Recently, political news group the Young Turks, which has a large presence on YouTube, began a Facebook show called “Final Judgment.”

For video creators, Facebook has some advantages over YouTube. Users treat YouTube almost like a library — they search for keywords, or specific videos. For a video to find a big audience, it either needs to come from an established creator with a fan base, or be shared on other outlets, such as news sites, blogs or social media.

Nearly 1.4 billion people log onto Facebook each month, and when they’re there, they watch — and share — most anything their friends post. That helps many videos uploaded to the social network outpace YouTube videos in views in the hours immediately after posting, several video creators said.

“It’s Facebook, more than anybody, who could give YouTube a run for their money,” said Eugene Lee, co-founder of ChannelMeter, a digital video analytics firm.

Though Facebook is an effective means of attracting viewers, it so far hasn’t provided a way for video creators to make money. The social network does not run ads before videos, nor does it share ad revenue with those who upload videos. Sheryl Sandberg, Facebook’s chief operating officer, told investors last month that the social network hasn’t figured out what form of payment it might offer.

YouTube makes money from the commercials that play before videos. It offers all users who upload videos a chance to share in ad revenue, generally steering 55 percent of ad sales to the person or group who uploaded the video.

One upstart competitor is trying to court YouTube stars by offering more. San Francisco video site Vessel, which has raised $77 million in venture capital, provides greater financial incentives — generally 70 percent of advertising revenue and a cut of monthly $2.99 subscriptions — to YouTube creators who post videos exclusively on Vessel for 72 hours.

YouTube stars Connor Franta and Arden Ricks, both popular vloggers, and Jack Vale, who posts pranks captured on hidden cameras, are among those who have joined Vessel.

Different audiences

Steve Raymond, CEO of Big Frame, a talent management agency that represents Franta, Vale and Ricks, said creators reach different audiences on multiple devices by putting their videos on many sites.

Vessel remains a small player. Steve Oh, the Young Turks’ chief operating officer, said putting exclusive content on Vessel for three days before YouTube is “crazy talk.”

“We would lose so many viewers that doesn’t make sense,” Oh said.

But Oh doesn’t oppose uploading videos to multiple sites. Even though the Young Turks’ “Final Judgment” show — based on the day’s biggest news story — is created with Facebook in mind, the group posts it on YouTube simultaneously.

For the Young Turks, Facebook generates attention and drives traffic to YouTube, where the group earns ad revenue, Oh said.

“Our strategy is to grow large on YouTube and large on Facebook,” Oh said. “In this new world of digital video, that’s how it works.”